2013 Maximum 401K Contribution Increased
The IRS 2013 401K maximum was officially announced, and just like last year, there’s an increase in the 401K contribution limit once again!
The Maximum 401K Contribution in 2013
The 2013 401K maximum contribution is $17,500! That makes two straight years of increases after three years of no increases from the IRS.
The 2009, 2010, and 2011 maximum 401K contributions had all been stuck at $16,500 prior to the 2012 maximum 401K contribution limit jumping from $16,500 to $17,000.
This maximum applies to your personal contributions to both traditional 401K’s and Roth 401K’s (or a combination of the two, if you have both). It is separate from the maximum employer 401K contribution.
403B and 457B plans will receive the same bump in limits in 2013.
2013 401K Catch-Up Contribution
The maximum 401K catch-up contribution per year for those over 50 years old, however, will stay the same at $5,500 over the standard contribution limit in 2013. No increase there. Same goes for 403B’s and 457′s.
How to Max Out your 401K in 2013
If you would like to max out your 401K in 2013, take $17,500 and divide it by your total salary from your employer. For example, if you make $70,000 per year (includes bonuses), then take $17,500 and divide by $70,000 to calculate the percentage of your pay you would need to contribute to max out your 401K.
In the above example, it would be 0.25, or 25%. Next, work with your HR department or your 401K administrator update your 401K contribution percentage.
401K Maximum Contributions Historically
The maximum contribution level has increased in all but six years going back to it’s beginning in 1987 (over 75% of the time). Three of those six years without an increase were 2009 through 2011.
It’s also worth nothing that the maximum 401K contribution amount has never declined.
Moving Beyond your 401K
Not everyone will be able to contribute the maximum, no doubt. If you can, however, it is one of the best things you can do for your financial future, particular when a possible employer 401K match is at stake.
If you do max and want to contribute more, you can also create a Traditional or Roth IRA (the 2013 IRA maximum contribution increases to $5,500). I moved both of mine to TradeKing, who has zero maintenance or inactivity fees if you maintain a modest balance of $2,500 or make one trade in a year. Trades are only $4.95.
If you have left an employer and have old 401K’s sitting around, you may want to consider a 401K rollover to an IRA or your current 401K. You’ll probably be saving money on fees in an IRA versus your 401K.
401K Maximum Discussion:
- Do you plan on maxing out your 401K this year or in 2013?
- Have you ever maxed out your 401K?
- Are you investing in a Traditional 401K, Roth 401K, or both?
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I am G.E. Miller, & 
I’m sorry, but I can’t find the actual IRS news bulletin for this. Could you point me at that?
Here’s the IRS bulletin:
http://content.govdelivery.com/bulletins/gd/USIRS-57e70c?reqfrom=share
Leigh, it was just recently posted to CNN Money.
http://money.cnn.com/2012/10/18/pf/taxes/401k-contribution-limit/
This comes as great news for me! I’ve been maxing my 401k for a few years now, and I don’t mind hiding yet another $500 away from my taxes.
From the IRS release…
The deductible amount under Section 219(b)(5)(A) for an individual making qualified
retirement contributions is increased from $5,000 to $5,500.
Does this include ROTH IRA contributions? Thanks.
Yes, it’s Roth + Traditional contributions combined.
Thank you!
I usually short the 401 by some for the sake of maxing a Roth each year. A combination about some nervousness about what tax rates will be when I finally draw from the 401, and finding the Roth a good mix of retirement and potentially penalty-free emergency funds.
I’m in the mortgage industry- not the most stable job source recently!- and the potential of a lengthy period of unemployment is always on my mind.
Good strategy if you’ve fully maxed out your employer’s 401K match first. If not, free money should win out over concern of future tax rates.
GEM,
I always had this confusion – does this 17,500$ limit apply to my contributions to 401K plus Roth IRA? Or is it just for 401K and 5,500$ for Roth IRA?
Thanks,
Mano
Just your 401K.
Does the $17,500 include my employer’s match or can I put $17,500 in on top of the match?
they are separate.
There are three ways money can go into a 401k plan. Your own contributions, your company’s match on your contributions, and your company profit share. Combined, these may add up to a maximum of $51,000 per year plus an additional $5,500 if you are over the age of 50.
Your own contributions are maxed at $17,500 plus an additional $5,500 if you are over 50 years old.
The $51,000 total maximum contribution and $17,500 personal maximum contribution is the IRS maximum for an individual per year regardless of whether or not you switch companies and contribute to multiple 401k’s.
Personal IRA’s are completely separate from 401k’s.
Is the $17500 a total number for myself and my spouse or is it $17500 each?
Each.
Ok, to summarize (I think):
Max 401k = $17500
50+ ‘catch-up” = $5500
Total max 401k = $23000
Separately (this is where I’m confused):
Traditional IRA OR Roth IRA (combination of both) max = $5500
In total, it seems like you could put (assuming near a 1%er I guess) almost $28500/year
Dave) Read these FAQs if you have a retirement plan at work (401k), plus you are interested in trying to deduct Traditional IRA contributions (there are limits on the IRA if you have an employer sponsored retirement plan):
“If you or your spouse is covered by an employer-sponsored retirement plan, and your income exceeds certain levels, you may not be able to deduct your entire contribution.”
http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs#1
http://www.irs.gov/Retirement-Plans/2013-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work
Can you tell me if this statement is true? If so, does it apply to Traditional Roth IRAs, Roth 401Ks, or both?
“The maximum annual federal before-tax and Roth after-tax contribution limit has increased to $17,500. The sum of these two types of contributions cannot exceed $17,500.”
Jane) The $17,500 annual contribution limit for 2013 is the maximum YOU can contribute to your 401k (either Traditional-401k or Roth-401k or a mixture of both). That limit does not include any company contributions to the 401k — so if your employer has “matching” you can still put in your $17,500, plus your employer can kick in thousands on top of that as well.
The $17,500 contribution limit is only for 401ks — it has nothing to do with IRAs (be that Traditional or Roth IRAs).
The first comment was correct. If you are covered by a retirement plan at work, such as a 401k, you cannot contribute to a traditional IRA. You can contribute to a roth.
That’s not true. You can always contribute to a Traditional IRA. You can only deduct only if your income is below certain levels: http://20somethingfinance.com/2013-maximum-ira-contribution/
Does it mean you will be taxed twice ? Now and at withdrawal? Wouldn’t it make sense then to put it in Roth Ira if ur gonna pay tax now anyway?
If your income falls below certain levels, it might make more sense to go with traditional and deduct. If it doesn’t, then yes, a roth makes more sense so you aren’t taxed twice.
I didn’t see it mentioned, so I’ll ask: is the $1000 IRA over-50 catch-up contribution still in play in 2013?
What if you are turning 50 during the year. Can I put in maximum plus catch up starting 1/1/2013 or does it have to be prorated?
I am 55. What is the max amount (before and after tax, combined) that I can contribute to my 401K program that I have at General Motors?. Is it $51K or is $55K?. Thank you for your help
The max for personal contributions to a 401k for you is $17,500 plus the additional $5,500 catch up contribution you qualify for since you are over 50 years old. Your company may or may not add additional funds to that depending on how your plan is set up.
My 401k contribution is set at 16%. I was led to believe this was the max pre tax amount. Is that true?
The max pre-tax percentage amount is 92%, however many plans set a limit on what percentage you may contribute to your 401k. Your plan may only allow contribution percentages up to 16%. Check your summary plan description or ask for a copy of the adoption agreement to learn more about your plan.
I’m changing job this year. Can I contribute max to 401k with current employer and then max again in the new employer?
Also I thought if you have company 401K plan, you cannot do roth IRA anymore. Is this incorrect then?
Thanks,
You can do Roth. You cannot do traditional, despite what this article claims.
That’s not true. You can always contribute to a Traditional IRA. You can only deduct only if your income is below certain levels: http://20somethingfinance.com/2013-maximum-ira-contribution/
You cannot contribute to a Roth IRA if you have a 401K. Instead a backdoor ROTH IRA can be setup where you contribute towards a Traditional IRA and then convert it into a ROTH IRA at the time of doing your taxes
Not true.
I thought at age 50 or above a person can contribute to a 401K and Roth which is tax free. The maximum is 23k so i put in 6K in the Roth and 17K to the 401K.